Magnolia's Multi Megadeal & Abu Dhabi's Private Credit Heist

Abu Dhabi’s Private Credit Heist

Institutional US CRE is fast becoming a game of “six degrees of Abu Dhabi.”

It was inevitable that the emirate, whose ruling Al Nahyan family controls a network of funds totaling $1.5 trillion+, would find its way deeper into CRE’s most intoxicating space, private credit. One of its most prominent SWFs, Mubadala, completed a $3B takeover of Fortress in May, while Fortress is going ham on what it calls a “trillion-dollar opportunity” set off by the collapse of US regional banks. The deal needed the government’s blessing to clear, but now that it has, Mubadala is back for more.

Abu Dhabi(Cont.)

The fund, led by the urbane Khaldoon Al Mubarak ⚽️ , is in talks to take a stake in major lender HPS, per Semafor. Run by Goldman alum Scott Kapnick, HPS was birthed from JPMorgan unit Highbridge and as of this summer had $117B of AUM. The name HPS might not jump out right away to industry insiders – it does much of its CRE debt investing through a JV w/ Related formed in ‘13. But it was thrust into the zeitgeist last year after taking over a Midtown office building at 850 Third from Chetrit Organization via a deed-in-lieu; Chetrit subsequently sued, alleging HPS left it exposed to tax penalties. (In May, HPS brought Waterman into the project)

Like many of its peers (see funds feeling fundy-y here) HPS has been touting the regional banking crisis as a big opportunity to expand its bets. To make inroads there though, it needs money money- there seems to be a sense among the merely large firms that if you’re not among the biggest, you might as well not play, something Fortress co-CEO Drew McKnight articulated this summer when announcing his intent to double AUM.

“For us to compete with larger firms like Ares, Apollo and Sixth Street, we need to continue to grow assets, because if we don’t then we’ll be less relevant,” he said.

Any Mubadala-HPS deal would create more cousins in an already incestuous CRE private credit space: Mubadala is also a backer of Blue Owl, which owns a stake in HPS. Meanwhile, Madison Realty Capital, ubiquitous in the large-loan game, is minority owned by Iconiq, which manages money for Zuck and other SV elite. And Mubadala is not Abu Dhabi’s only pathway into private credit, either: ADIA is a huge player in European RE debt, and recently backed Arrow Global’s debt fund targeting the continent to the tune of $400M. (Mubadala is in the European RE debt game too, through a JV w/ Ares.)

Bonus: The execs running these funds are a particular Gulfie hybrid of young exec w/ lots of political juice, fluently toggling between statecraft & big business - recommend reading this profile of Al Mubarak (who’s also Pep’s boss at Man City)

Magnolia’s Multi Megadeal

KKR’s $2.1B megabuy for Lennar’s Quarterra unit this summer, at $400K-ish a door, was such a big boost for the multifamily market that other sellers decided to try their luck: This summer, Greystar began shopping around a 2K-unit Sunbelt-focused value-add package, known among industry insiders as “Project Freedom.” Now, an unlikely buyer has emerged, beating out a cadre of some of the market’s biggest institutional players: Waterton alum Max Peek’s Magnolia Capital is in pole position on the deal, The Promote has learned, w/ Goldman Sachs * as Peek’s equity partner. It’s unclear if Magnolia is taking down the entire portfolio, or a big chunk of it – the company didn’t respond to a request for comment. JLL, which brokered the Quarterra deal, was marketing the portfolio on behalf of Greystar – it didn’t comment by press time.

No deets on pricing just yet, but 1 source familiar w/ the bidding process said other buyers were underwriting the portfolio, in which the units are 10Y-ish old on avg., at cap rates of 4.5-4.75%. Magnolia would likely pay north of $275K/door for the package it’s gunning to buy, the source added.

The deal, if it closes, would be among a flurry of marquee MF transactions over the past few months: Blackstone bought AIR Communities for $10B in April; and Equity Residential paid just under $1B for a Blackstone portfolio in August.

* Goldman also backed Ballast’s megabet on a major SF multi portfolio - lender RBC was poised to take a big chunk of that back earlier this year.

Harris: We Need to Up Housing Supply

After ducking the establishment media outlets, Kamala Harris sat down with the “Call Her Daddy” podcast (huge w/ young women) Sunday and made perhaps her most direct call for more housing. After host Alex Cooper noted that many women were opting out of having kids because it was too expensive, Harris replied that one of the factors was the prohibitive cost of housing, caused in part by the fact that we’re building v little of it.

“We need to increase the housing supply,” she said, adding that her administration would target the building of 3M new units of housing by the end of her first term, in part through tax incentives for private developers. Campaign rhetoric for now, and devil’s in the details & all that, but… IDing supply as a root problem is a solid start.

Related Gets Malorted

Related Midwest & AFL-CIO face a $175M foreclosure at a 47-story, 500-unit luxury rental in Streeterville, per TRD, after lifeco lender MassMutual filed a lawsuit last week. The lender had given the Related JV extra rope to land a refi w/ a forbearance agreement signed this spring, but the owner couldn’t pull it off. A spox for the firm told TRD that it’s in the process of landing fresh capital, though it didn’t provide further deets. Related had cashed $75M out of the building in ‘14 at the time of the MassMutual deal.

Quickies

• “We’re back:” Prince Alwaleed plots comeback w/ world’s tallest tower 

• Zuck soups up Deep Brooklyn’s vehicle of choice - the minivan 👀 

• OpenAI, which just closed a Josh Kushner-led $6.6B megaround, takes 90K sf in Kushner Cos.’ Puck Building

• NexPoint lands $1.5B refi on Sunbelt multi portfolio

• Spanish giant Azora forms $3B US resi JV w/ Advenir 

• Rialto has filed at least 15 foreclosure suits against Signature borrowers (also see: Tragedy of the Special Servicer)

Unquotable Quotes